However, Stormont sources said Downing Street would have to take decisive action when Parliament returns from recess next week.

They stressed that a budget for Northern Ireland would have to be "imminently introduced" and that a rate would also have to be set.

Mrs Bradley said: "In the continued absence of an Executive... challenging decisions will have to be taken by the UK Government and I will update Parliament when the House returns."

While the Government is unlikely to introduce full-blown direct rule, the appointment of ministers by Westminster to run Northern Ireland will be difficult to avoid as key decisions on health and education must be taken.

The Secretary of State is also likely to move to cut MLAs' pay.

Unionists said Northern Ireland could not continue in limbo any longer while nationalists insisted Dublin must be intimately involved in the next step forward.

A war of words broke out last night between DUP leader Arlene Foster and Sinn Fein vice-president Michelle O'Neill over who was to blame for the talks collapse.

Earlier, Mrs Foster pulled the plug on the discussions and said there was currently no prospect of restoring devolution.

Mrs O'Neill said: "Sinn Fein engaged, we worked in good faith, we stretched ourselves.

"We had reached an accommodation with the leadership of the DUP. The DUP failed to close the deal. They have now collapsed this process."

Nationalist sources insisted that the DUP had agreed to an Irish Language Act but that Mrs Foster and her negotiating team had been unable to sell that to other colleagues.

But Mrs Foster hit back at that claim.

"There was no deal or accommodation. It is unfortunate we could not reach a fair and balanced agreement. One language or culture cannot be elevated above others," she said.

"I was not prepared to ask the party to support a one-sided deal. Respect is a two-way street and Sinn Fein should take this time to reflect on how it fails to respect our British identity, whether that is our flag, our young people serving in the armed forces or the very name of this country."

The DUP leader also called on the Government to set a budget and "start making policy decisions about our schools, hospitals and infrastructure".

The Secretary of State maintained that "substantive progress" had been made during the discussions, but conceded "this phase of talks has reached a conclusion".

She said: "I would urge everyone to reflect on the circumstances which have led to this, and their positions both now and in the future. The position of the UK Government remains the same - devolved government is in the best interests of everyone in Northern Ireland and is best for the Union."

Irish Foreign Affairs Minister Simon Coveney described the DUP's announcement on the talks as "very disappointing". He insisted Dublin would be involved in the political road ahead.

"The Secretary of State and I have spoken and will remain in close contact and I am briefing the Taoiseach on developments," he said.

"As co-guarantors of the Good Friday Agreement, the UK and Irish Governments have an obligation to uphold and protect the letter and spirit of that Agreement. We will need to reflect in the coming days on how best to do that."

Taoiseach Leo Varadkar also expressed regret at the talks ending, adding "power-sharing and working together are the only way forward for Northern Ireland".

Labour's shadow Secretary of State Owen Smith blamed the breakdown on the DUP's unwillingness to accept legislation to support the Irish language and marriage equality.

"Their lack of leadership on these issues, despite their powerful position in Stormont and Westminster, leaves Northern Ireland without an accountable government or a voice in the Brexit negotiations," he said.

He called on Mrs Bradley to explain how she hoped to "get the DUP back to the table", and if that proved impossible "how she is going to take forward issues such as equal marriage, as well as dealing with tough decisions on health, education and infrastructure".

Politicians from across the spectrum expressed deep concern about the future of Stormont last night. However, DUP MLAs said they were relieved the proposed deal was off as they had been inundated with messages from alarmed constituents and could not have sold it on the ground.